Caution State Law Variances!
SECTION 608. APPLICATION OF SECTION 404 AFTER MERGER.
(a) A creditor's right that existed under Section 404 immediately before a merger under Section 604 may be enforced after the merger in accordance with the following rules:
(1) A creditor's right that existed immediately before the merger against the surviving company, a continuing protected series, or a relocated protected series continues without change after the merger.
JayNote: Under § 608(a)(1), if a creditor had a right against either a continuing protected series or a relocated protected series prior to the merger, that right doesn't change after the merger.
(2) A creditor's right that existed immediately before the merger against a non-surviving company:
(A) may be asserted against an asset of the non-surviving company which vested in the surviving company as a result of the merger; and
(B) does not otherwise change.
JayNote: What if, prior to the merger, a creditor had a right against the LLC that was terminated as part of the merger? In that event, the creditor can satisfy its right against whatever property of that LLC which passed to the surviving company under § 608(a)(2).
(3) Subject to subsection (b), the following rules apply:
JayNote: Paragraph (a)(3) of § 608 is confusing in the extreme even to somebody who thinks they might otherwise sort of understand this stuff.
(A) In addition to the remedy stated in paragraph (1), a creditor with a right under Section 404 which existed immediately before the merger against a non-surviving company or a relocated protected series may assert the right against:
(i) an asset of the surviving company, other than an asset of the non-surviving company which vested in the surviving company as a result of the merger;
(ii) an asset of a continuing protected series; or
(iii) an asset of a protected series established by the surviving company as a result of the merger;
(iv) if the creditor's right was against an asset of the non-surviving company, an asset of a relocated series; or
(v) if the creditor's right was against an asset of a relocated protected series, an asset of another relocated protected series.
JayNote: Section 608(a)(3)(A) relates to a creditor who, prior to the merger, had a right against an unassociated asset (per § 404) of either the non-surviving company or a relocated protected series of that non-surviving company. In that case, with some limitations, the creditor can enforce the right against an asset of the surviving company or any of its continuing or relocated protected series. Note that this only relates to unassociated assets; if a creditor had a right against an associated asset, then that right would follow the asset to whatever protected series made it through the merger under § 608(a)(1).
(B) In addition to the remedy stated in paragraph (2), a creditor with a right that existed immediately before the merger against the surviving company or a continuing protected series may assert the right against:
(i) an asset of a relocated protected series; or
(ii) an asset of a non-surviving company which vested in the surviving company as a result of the merger.
JayNote: Section 608(a)(3)(B) relates to a creditor who, prior to the merger, had a right against the surviving company or one of its protected series that survived the merger. In that case, the creditor can enforce the right against either an asset of a relocated protected series or an asset of the surviving company which had vested in that company from the non-surviving company. Unlike (3)(A), (3)(B) is not restricted to unassociated assets.
(b) For the purposes of subsection (a)(3) and Section 404(b)(1)(A), (2)(A), and (3)(A), the incurrence date is deemed be the date on which the merger becomes effective.
JayNote: The testing date for the creditor's rights is the date of the merger, per § 608(b).
(c) A merger under Section 604 does not affect the manner in which Section 404 applies to a liability incurred after the merger.
JayNote: Per § 608)(c), a creditor's rights against an unassociated asset (under § 404) is not affected by the merger so long as the liability to the creditor was incurred after the merger, i.e., the merger doesn't affect post-merger liabilities.
Reporter's Comment to Section 608
As explained in the comment to Section 404, ordinarily the transfer of an asset ends any preexisting Section 404 exposure applicable to the asset. As a result, it is necessary to protect against a merger under Section 604 being used solely or essentially to extinguish preexisting Section 404 exposure. Section 608 inhibits such misuse in three ways.
First, the section preserves preexisting exposure to the extent practicable: As to:
Second, with one major caveat, under Section 608(a)(3)(A) a creditor with a preexisting Section 404 claim against a non-surviving limited liability company or a relocated protected series may assert the claim against any asset owned by the surviving limited liability company or any protected series of the surviving company.
Third, with the same major caveat, under Section 608(a)(3)(B), a creditor with a preexisting Section 404 claim against an asset of the surviving limited liability company or a continuing protected series of the company may assert the claim against an asset of a relocated protected series or an asset of the non-surviving company that vested as a result of the merger in the surviving limited liability company.
The major caveat: For purposes of Section 608(a)(3)(A) and (B), the incurrence date is deemed to be the effective date of the merger. In consequence, due diligence for a surviving limited liability company in a merger under Section 604 includes checking the adequacy of Section 301 recordkeeping for any asset that after the merger will be owned by the surviving company or any relocated or continuing protected series of the company as well as by any protected series created in the merger.
For the definition of "incurrence date", see Section 404(a)(2).
UPSA AND WEBSITE CONTENTS
ARTICLE 1. GENERAL PROVISIONS
SECTION 101. SHORT TITLE. SECTION 102. DEFINITIONS. SECTION 103. NATURE OF PROTECTED SERIES. SECTION 104. POWERS AND DURATION OF PROTECTED SERIES. SECTION 105. GOVERNING LAW. SECTION 106. RELATION OF OPERATING AGREEMENT, THIS ACT, AND LIMITED LIABILITY COMPANY ACT. SECTION 107. ADDITIONAL LIMITATIONS ON OPERATING AGREEMENT. SECTION 108. RULES FOR APPLYING LIMITED LIABILITY COMPANY ACT TO SPECIFIED PROVISIONS OF ACT.
ARTICLE 2. ESTABLISHING PROTECTED SERIES
SECTION 201. PROTECTED SERIES DESIGNATION; AMENDMENT. SECTION 202. NAME. SECTION 203. REGISTERED AGENT. SECTION 204. SERVICE OF PROCESS, NOTICE, DEMAND, OR OTHER RECORD. SECTION 205. CERTIFICATE OF GOOD STANDING FOR PROTECTED SERIES. SECTION 206. INFORMATION REQUIRED IN ANNUAL BIENNIAL REPORT; EFFECT OF FAILURE TO PROVIDE.
ARTICLE 3. ASSOCIATED ASSET; ASSOCIATED MEMBER; PROTECTED-SERIES TRANSFERABLE INTEREST; MANAGEMENT; RIGHT OF INFORMATION
SECTION 301. ASSOCIATED ASSET. SECTION 302. ASSOCIATED MEMBER. SECTION 303. PROTECTED-SERIES TRANSFERABLE INTEREST. SECTION 304. MANAGEMENT. SECTION 305. RIGHT OF PERSON NOT ASSOCIATED MEMBER OF PROTECTED SERIES TO INFORMATION CONCERNING PROTECTED SERIES.
ARTICLE 4. LIMITATION ON LIABILITY AND ENFORCEMENT OF CLAIMS
SECTION 401. LIMITATIONS ON LIABILITY. SECTION 402. CLAIM SEEKING TO DISREGARD LIMITATION OF LIABILITY. SECTION 403. REMEDIES OF JUDGMENT CREDITOR OF ASSOCIATED MEMBER OR PROTECTED-SERIES TRANSFEREE. SECTION 404. ENFORCEMENT AGAINST NON-ASSOCIATED ASSET.
ARTICLE 5. DISSOLUTION AND WINDING UP OF PROTECTED SERIES
SECTION 501. EVENTS CAUSING DISSOLUTION OF PROTECTED SERIES. SECTION 502. WINDING UP DISSOLVED PROTECTED SERIES. SECTION 503. EFFECT OF REINSTATEMENT OF SERIES LIMITED LIABILITY COMPANY OR REVOCATION OF VOLUNTARY DISSOLUTION.
ARTICLE 6. ENTITY TRANSACTIONS RESTRICTED
SECTION 601. DEFINITIONS. SECTION 602. PROTECTED SERIES MAY NOT BE PARTY TO ENTITY TRANSACTION. SECTION 603. RESTRICTION ON ENTITY TRANSACTION INVOLVING PROTECTED SERIES. SECTION 604. MERGER AUTHORIZED; PARTIES RESTRICTED. SECTION 605. PLAN OF MERGER. SECTION 606. STATEMENT OF MERGER. SECTION 607. EFFECT OF MERGER. SECTION 608. APPLICATION OF SECTION 404 AFTER MERGER.
ARTICLE 7. FOREIGN PROTECTED SERIES
SECTION 701. GOVERNING LAW. SECTION 702. NO ATTRIBUTION OF ACTIVITIES CONSTITUTING DOING BUSINESS OR FOR ESTABLISHING JURISDICTION. SECTION 703. REGISTRATION OF FOREIGN PROTECTED SERIES. SECTION 704. DISCLOSURE REQUIRED WHEN FOREIGN SERIES LIMITED LIABILITY COMPANY OR FOREIGN PROTECTED SERIES PARTY TO PROCEEDING.
ARTICLE 8. MISCELLANEOUS PROVISIONS
SECTION 801. UNIFORMITY OF APPLICATION AND CONSTRUCTION. SECTION 802. RELATION TO ELECTRONIC SIGNATURES IN GLOBAL AND NATIONAL COMMERCE ACT. SECTION 803. TRANSITIONAL PROVISIONS. SECTION 804. SAVINGS CLAUSE. SECTION 805. SEVERABILITY CLAUSE. SECTION 806. REPEALS; CONFORMING AMENDMENTS. SECTION 807. EFFECTIVE DATE.
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Protected Series Agreements and Forms -- A list of the "best practices" agreements and records that all protected series structures should have.
SERIES LLC COURT OPINIONS
UPSA COURT OPINIONS
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NON-UPSA COURT OPINIONS
191212 ... Ohio ... Delaware Act .. MSP Recovery Claims, Series LLC v. Phoenix Ins. Co., 2019 WL 6770981 (N.D. Ohio, 2019).
181019 ... Florida ... Delaware Act ... MRP Recovery Claims, Series LLC v. USAA General Indemnity Co., 2018 WL 5112998 (S.D.Fla., Oct. 19, 2018).
SERIES LLC ARTICLES BY JAY ADKISSON
2020.03.17 ... Series LLC Not Allowed To Play Pea-Shell Game In City Of Urbana Opinion
2020.02.16 ... Talisman Casualty Denied Diversity Jurisdiction Of Protected Cell Series LLC In National WW II Museum Case
2019.01.28 ... Understanding The Protected Series Act: Article 8 And Final Thoughts
2018.11.24 ... Understanding The Protected Series Act: Treating Out-Of-State Series
2018.11.18 ... Understanding The Protected Series Act: Mergers
2018.10.29 ... Understanding The Protected Series Act: Dissolution And Winding Up Of Protected Series
2018.10.21 ... Understanding The Protected Series Act: Liability Limitations And Claims
2018.08.30 ... Understanding The Protected Series Act: Assets, Members And Management
2018.08.28 ... Understanding The Protected Series Act: Creating A Protected Series And Service Of Process
2018.07.18 ... Understanding The Protected Series Act: The Framework of UPSA - Part 2 of a Series
2018.06.18 ... Understanding The Protected Series Act: What Is A Protected Series?
More articles on Series LLCs by Jay Adkisson click here
THE CHARGING ORDER PRACTICE GUIDE
by Jay Adkisson
The Charging Order Practice Guide: Understanding Judgment Creditor Rights Against LLC Members, by Jay D. Adkisson (2018), published by the LLCs, Partnerships and Unincorporated Entities Committee of the Business Law Section of the American Bar Association
Now available for purchase directly from the ABA at https://goo.gl/faZzY6
Now also available at Amazon at Also available from Amazon at https://www.amazon.com/Charging-Orders-Practice-Guide-Understanding/dp/1641052643
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